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India’s Standing in Global Textile and Apparel Industry

The textile and apparel industry is one of the leading segments of the Indian economy and one of the largest sources of foreign exchange earnings for India. This industry accounts for about 13% of the total exports earnings of the country. The industry holds importance from the employment point of view as well. It is the second largest provider of employment after agriculture. It provides direct employment to 52 million people and indirect employment to an additional 69 million people. India’s key strengths in this sector lies in availabilty of all types of natural and manmade fibres, large pool of manpower across the levels of hierarchy, presence of complete value chain, a large and growing domestic market and  design capability. These factors make India a preferred destination for textile investments as compared to its competing nations like Bangladesh, Vietnam, Sri Lanka etc.

1.    Indian Textile Manufacturing Scenario

The textile industry of India covers all the segments of value chain viz. natural and manmade fiber production, spinning, weaving, knitting, processing, garmenting, made-ups and technical textiles.

Table: Installed Capacities in Indian Textile Sector (2016-2017)

Description

Capacities

Spindles

52 Mn

Rotor

0.9 Mn

Looms (Including power looms)

2.6 Mn

Man Made Fiber

1.8 Bn. kg.

Man Made Filament

2.2 Bn. kg.

 

 

Source: Office of Textile Commissioner, Government of India

 

1.1.  Staple Fiber Production

India’s total staple fiber production stood at 9,189 million kg in 2016-17. Natural fiber production in India has reduced at 1% CAGR, but the production of man-made staple fiber grew at 2% CAGR[1] since 2011-12.

 

Figure: Staple Fiber Production in India (Mn. kg)

1.2.  Spun Yarn Production

India is one of the most competitive producer of spun yarn. The production of spun yarn stood at 5,659 million kg in 2016-17, growing at a CAGR of 3% since 2011-12.

Figure: Spun Yarn Production in India (Mn. kg)

Source: Office of Textile Commissioner, Government of India

 

1.3.  Filament Yarn Production

Manmade filament yarn production in India has declined at a CAGR of 5% since 2011-12. Polyester filament yarn accounts for more than 90% of the total manmade filament yarn production.

Figure: Man-Made Filament Yarn Production in India (Mn. kg)

Source: Office of Textile Commissioner

 

1.4.  Fabric Production

Fabric production in India has grown at a CAGR of 1% since 2011-12. Cotton fabrics have the majority share of 60% while manmade fabrics and blended fabrics have a share of 23% and 17%, respectively.

Figure: Fabric Production in India (Mn. sq. m)

Source: Office of Textile Commissioner, Government of India

 

2.    Indian Textile and Apparel Market

Indian textile and apparel market is currently estimated at US$ 122 Bn. The domestic consumption of textiles and apparel constitutes nearly 70% of the total market size while exports constitute the rest 30%.

 

Figure: India’s Textile and Apparel Market Break-up (2016)

Source: DGCI&S and Wazir Analysis

 

2.1.  Domestic Market Overview

The domestic consumption of US$ 85 bn. constitutes of apparel (US$ 63 bn.), technical textiles (US$ 16 bn.) and home textiles (US$ 6 bn.). From 2005 to 2016, the overall consumption has grown at a healthy 10% CAGR. Segment wise, apparel is the largest one while technical textiles is the one with fastest growth rate.

Figure: Historical Growth of Indian Domestic Market (Values in US$ bn.)

 Source: Wazir Analysis

Indian consumers’ affinity towards brands and organized retailing is increasing, which is helping the consumption growth of all products, including textile and apparel. Organized retailing in India currently stands at only 9% of the overall retail market of US$ 650 Bn. Within this, apparel has a share of approximately 35%. With growth of disposable income, favorable demographics, changing lifestyles and a high potential for penetrating non-urban metro markets; the share of organized markets in India is expected to reach 31% by 2025. India is also witnessing growth of its aspiring middle class who tend to seek value and consume premium products. This shift in number of households within different income brackets will improve the consumption of products and services, which will definitely include textile and apparel as a lifestyle choice to enhance fashion. The vast population base and growing economy has caused global retailers and brands to enter the Indian market, either on their own or through local partners.

2.2.  Indian Exports Overview

Global textile and apparel trade grew at a CAGR of 4 % since 2005 to reach a value of US$ 743 bn. in 2016. During the same period, India’s export of textile and apparel grew at a comparatively higher rate of 7% to reach US$ 37 bn.

Figure: Comparative Performance of Indian T&A Exports vis-à-vis Global Trade (Values in US$ bn.)

Source: UN Comtrade and DGCIS

 

In terms of global ranking, India is ranked 2nd in textile export with 6% share and 5th in apparel export with 4% share. Overall, India holds second position with 5% share of global exports.  Apparel is the largest category exported from India having a share of 46% in the total textile and apparel exports. Segment-wise breakup of Indian textile and apparel exports is given ahead:

Figure: Segment Wise Share of Indian Textile and Apparel exports (2016-17)

Source: DGCIS

 

Indian exporters are supported by Government schemes and incentives such as Duty Drawback, Rebate of State Levies (ROSL), Merchant Export from India Scheme (MEIS), Advanced Authorization, Interest Subvention, Market Development Assistance (MDA) and Market Access Initiative (MAI). These support initiatives allow Indian exporters to overcome a large part of duty disadvantage they face in markets of EU and US where some of the competing nations get a zero duty access.

European Union is the largest market for Indian textile and apparel products followed by USA. In 2016-17, share of exports to EU was 25% whereas that to USA was 21%. A detailed analysis of India’s exports to key markets over last 6 years indicate that exports to UAE have shown the highest growth rate with a CAGR of 17% while that to China have shown a sharp decline of 18%.

Table: T&A Export Trend in Key Markets

Values in US$ Mn

2011-12

2012-13

2013-14

2014-15

2015-16

2016-17

CAGR

Share (2016-17)

EU

9.6

8.5

9.5

9.9

9.3

9.3

-1%

25%

USA

6

6.1

6.7

7.2

7.5

7.6

5%

21%

UAE

2.2

2.2

2.7

3.8

4.5

4.8

17%

13%

Bangladesh

1.3

1.8

1.9

2

2.1

2.1

11%

6%

China

4.4

3.6

4.1

2.6

2

1.7

-18%

5%

Others

0

0

0

0

0

0

0%

0%

Total

34.5

33.1

37.6

37.7

36.7

36.6

1%

 

Source: DGCIS

Indian textile and apparel industry has double advantage of being export competitive as well having large domestic consumption which is growing. This provides it resilience amid global uncertainties and demand slowdown. This aspect positions Indian sector far ahead of smaller exporting nations like Bangladesh, Vietnam, Myanmar and Sri Lanka which rely exclusively on exports. In recent times Indian government has declared special support for the sector which has improved its cost competitiveness to great extent. For any international investor who is looking to diversify, India presents itself as the ideal investment destination by virtue of all these advantages. The social, political and financial stability of the country adds to this attractiveness further.

We at Wazir Advisors have been advising textile and apparel sector clients for almost a decade now. Looking into the emerging global trends where the manufacturing costs in China are increasing and the emerging destinations like Myanmar and Ethiopia are facing political turmoil we are of the opinion that India will soon emerge as a global textile and apparel powerhouse. The opportunity in India for export as well as domestic market is beyond question. However, Indian markets and systems have their own peculiarities which should be understood by the investor well in advance. As a textile and apparel sector management consulting firm our specialization lies in assisting clients to understand the opportunity, device business models to tap it and then help in implementation as well.

AUTHORS:

Varun Vaid, Associate Director | This email address is being protected from spambots. You need JavaScript enabled to view it.

Ayushi Puri, Associate Consultant | This email address is being protected from spambots. You need JavaScript enabled to view it.

 

 

[1] Compounded Annual Growth Rate

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